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Investment advisers face extra £28m in FSCS levies

FSCS Interior 480

Investment advisers are facing a further £28m in Financial Services Compensation Scheme levies due to the collapse of Pritchard Stockbrokers and Worldspreads, with more claims expected relating to MF Global, Arch cru and Rockingham.

In its Outlook newsletter, published today, the FSCS has forecast a £25m interim levy on the investment intermediation class for 2012/13 due to higher than estimated compensation costs relating to Pritchard Stockbrokers and spreadbetting firm Worldspreads.

Advisers within the life and pensions intermediation class are not facing additional interim levies.

The forecasted £25m interim levy on investment advisers is not expected to trigger the fund manager cross subsidy, which kicks in once adviser claims breach the annual £100m limit. The FSCS has so far levied £66m on investment advisers this year, leaving £34m in claims before the limit is reached.

The FSCS expects to pay out £16m in 2012/13 in relation to Pritchard Stockbrokers, and £17m in relation to Worldspreads. The compensation scheme has already paid out £20.6m to claimants in failed investment brokerage MF Global and expects to pay another £5m in 2012/13.

The FSCS is also handling claims received against advisers about recommendations to invest in the Arch cru funds, which were suspended in March 2009. It has received 1,800 claims against 60 different IFAs to date who advised on Arch cru. Decisions on 350 claims have been made so far, with £5m in compensation paid. The FSCS says it expects more Arch cru claims this year and next year.

Claims against Rockingham Independent, which was declared in default last month, are also being considered by the FSCS. It is still unclear whether Rockingham is legally liable for losses incurred by clients who invested in ARM bonds, which underpinned Rockingham’s Rita product but were issued from Luxemburg without the appropriate licence. The FSCS does not know at this stage whether it will be able to accept claims by Rockingham clients who invested in ARM.

In addition to the £25m interim levy, investment advisers are facing a further £3m in FSCS levies due to the resubmission of tariff data on which levies were based for 2010. The FSCS allowed firms to resubmit their tariff data after inconsistencies emerged about the way firms were reporting income.

As a result of resubmissions the FSCS has calculated that a total of £71m was overpaid by firms, which means this amount needs to be refunded to those who overpaid and redistributed to the industry.

Fund managers face a redistribution levy of £33m while investment advisers face a redistribution of levy £3m.

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FSCS 2012/13

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Comments

There are 17 comments at the moment, we would love to hear your opinion too.

  1. Hoorar!!!

    The weekend starts here…. thanks.

  2. I’m sure that this will be further unwelcome news, but also wonder how “we” are progressing with a fair categorisation of investment advisers. Also I assume this has implications for your other news today with the FSA setting out business model stress testing?

  3. Just finally got my qcf level 4 last week after a torturous year of exams and trying to sustain my income, run a business, keep clients happy etc etc etc.

    Now Im told I will probably have to pay another few thousand next year because a stockbroker and a bookie have went belly up, both of which I never heard of.

    16 years in the business and never had a claim.

    Whats it all about………………….

  4. Cheer up – if you are unincorporated that means at least a 40% discount. Just how much tax will HMRC be losing at a time when they are trying to scrape up every penny?

    It just cheers me a little to think that the tax take will reduce as a result. Link that to a judicious piece of pension planning and the tax bill should be tiny. A tiny silver lining.

  5. So individuals are involved in spreadbetting – are being bailed out – what a joke!!!!!

  6. Why in gods name are we having to pay for “Worldspreads” failure. A spread betting firm collapse by any measure should never cost advisers money. If those idiots who decided to gamble their money and made a packet would they send some to their local IFA?

    What a complete and utter shambles this industry is in, the inherent unfairness of this system is to obvious to repeat, but when the last solvent iFA is put out of business due to these unlimited costs, will they please save energy and switch the lights and heating off.

  7. i lost my money on the grand national last year ,, any chance of claiming the £100 back

  8. So what is this likely to mean per adviser? Basically how will this translate into a number we can relate to?

  9. The FSA spawned the voracious beast that is FSCS.

    If I could blow up the Canary C**ts I’d press the button in a flash.

  10. Mmmm, nice pic of the lovely reception area though…………

  11. I recently was asked to act for a managing partner of a large firm of solicitors. When I put my fee proposal before him he said that £200 an hour was too much and that £650 was too much for a report on what he should do with his SIPP to provide a certain income in just a few years time.

    Since then I have discovered that a tax adviser with a similar turnover and client base to me pays 1/10th of what I do for PI cover and has no drain to the FSA, FSCS, FOS, MAS. I worked out that about 12% of my tunover is down to various regulatory & compliance costs. Thats without a hike in FSCS, MAS for next year.

    The tax adviser in question was shocked and I am considering putting this on my invoices as a seperate disbursement so that clients appreciate the true cost of being an IFA.

    We can not go on being squeezed at both ends like this.

    It seems that the goverrnment is doing everything it can to create a lack of confidence in financial products by alllowing the no win no fee brigate open season, by wounding pension savings incentives, by openely criticising charges, by banning of “nasty” commission yet at the same time allowing such credible advertising of gambling, ppi misselling & pay day loans. I dont know about you but I am begining to feel like the odd one out that I dont gamble or play bingo online.

    If only they would spend as much time and money sorting out payday loans and gambling as they do killing us by a thousand cuts.

    Please lets have something positive like ditch the MAS & pay for regulation by a product levy.

  12. Great, thanks for that news much appreciated.

  13. Not to worry, Have you got the number for Wonga?

  14. It’s all politically driven. Keeping the U.S. happy in this case. The bit I like is how the bulletins for FSCS are e-mailed late on a Friday…Presumably in the hope that we bin the bad news before bothering to read it and spoil the weekend!

    Guys and Gals, what will be, will be and even the FSA/FCA don’t really have the say that you think!

    Best thing to do is to vote a fringe party in at the next election and upskittle the whole lot of the proceedings!

  15. If 20% of IFA’s pack up their bags will the remainder have a 20% increase in their “contributions” to make up the shortfall

  16. Continually gobsmacked by this debacle 1st December 2012 at 11:42 am

    @Anonymous
    No, it would go up 25% in fact.
    Happy Xmas.

  17. Bob the builder wants a figure to relate to – a penny to these shysters is a penny too much, we work hard to earn our ears of corn, but are constantly placed in a situation whereby we are made the scapegoats for crooks, cheats, liars, thieves and a myriad of other unmentionable people with dubious businessess, which once they are found out simply land us with their liabilities.

    As for fair progression of categorisation of advisers is concerned, don’t expect any fair treatment from these people, their jobs depend on continuing to shaft the IFA community for every penny until there is nothing left.

    There is nothing fair in our industry anymore and it would serve this country right if the financial services industry collapsed under these burdens.

    The English Bill of Rights spells out in no uncertain terms that no fines or forfeitures are permissable without a trial in a court of law.

    The crooks, cheats, liars, thieves and incompetents should be put on trial and their assets siezed to pay for all this mess, especially those Worldspread and Pritchard numpties who should have an international arrest warrant issued against them for fraud.

    I used to work in an industry which prized prudence, rewarded ethical and honest behaviour and punished crooks, cheats, liars and thieves, now I work in an industry which makes the innocent pay for the guilty parties crimes.

    Something definitely amiss in the court of the FSA (sic)

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